However, while that’s the generally accepted idea behind people taking out insurance policies, it doesn’t always play out the way people expect. Insurance companies accept and look at claims for coverage as per the insurance agreement that was struck. But even with that policy in place, sometimes an insurance company will deny a claim and decide it doesn’t have to pay this out. But why does this happen?
There are several reasons why an insurance company may deny a claim on an injury or other accident. Some of these reasons are legitimate, while others are part of a rarer type of insurance fraud conducted by the insurance company itself. Here are some of the reasons why a claim may be denied.
It Does Not Fall Under Policy
This is quite a common reason for insurance companies to deny a claim. It can happen in many different situations. For example, a homeowner may not “read the fine print” of a home insurance policy and assume that anything that happens to a house is covered by home insurance.
But when a flood occurs, the homeowner now finds that it is a separate insurance policy, was not covered by general home insurance. In this instance, an insurance company is on safe, legal grounds to deny a claim. The homeowner should have known flood coverage was not part of the policy.
In some cases, a person may knowingly or unknowingly violate the terms of an insurance policy. Auto insurance, for example, works under the assumption that a driver in an accident is obeying all traffic laws. However, if a driver is under the influence of a substance and is injured in an accident, or a driver is using a car for work purposes, instead of personal reasons, or a driver has a suspended license but got behind the wheel anyway, these are all examples of policy violations.
These circumstances would result in a denial of an insurance claim because the driver was not following the terms of the existing insurance agreement.
Denial Without Explanation
This type of denial falls under “bad faith” insurance actions when an insurance company itself may be deliberately and maliciously attempting to get out of its obligations to support a customer. In some cases, the insurance company will deny a claim but will give zero explanation of why they are doing so.
The hope, when taking this action, is that the victim will accept the decision with no contest and leave the situation alone.
Failing To Investigate
It is to the benefit of both the victim and the insurance company to investigate an accident and determine what happened. The sequence of events can be understood and, perhaps most important of all, fault can be assigned once it is clear who—if anyone—acted negligently in the event.
A verdict on paying out insurance can’t be made or honored without this investigation. If an insurer is refusing to conduct an investigation, it may indicate they are already aware the inquiry will be in favor of the victim and don’t wish to complete the investigation to avoid paying.
Sometimes an insurance company will appear to make all the right moves and approve a claim by a customer. However, when the time comes for the customer to receive payments, the insurance company may either not do so on time, inconveniencing the customer, or in some cases, not pay at all.
Misrepresenting Policy Language
In some cases, a denial of a claim because something falls out of policy is due to the customer not being adequately informed. In other cases, however, the insurance company, or its representatives, may deliberately mislead a client on how coverage works, to get a person to sign on for coverage that doesn’t exist.
Sometimes, it’s not the insurance company itself that is acting in bad faith, but an individual insurer or insurance agent. An insurance agent may claim to act on behalf of a company and receive premiums from a customer, but is taking some—or even all—of that premium and not passing it on to the company. As a result, when the time comes to file a claim, the insurance company can deny a claim because premiums were never paid.
If you find yourself being victimized by your insurance company, this isn’t something that you have to accept. Talk to a personal injury lawyer about your situation and find out what to do next.